Facilities Management Corporation vs. De la Rosa

A non-resident foreign corporation that recruits Filipino workers in the Philippines for its own use abroad, appoints a resident agent, and executes and renews employment contracts in Manila is "doing business" in the Philippines within the purview of Section 14, Rule 14 of the Rules of Court, thereby subjecting it to the jurisdiction of Philippine courts and labor tribunals.

Facilities Management Corporation (FMC) is a foreign corporation domiciled outside the Philippines, engaged in operations on Wake Island. J. S. Dreyer is an officer of FMC, and J. V. Catuira was FMC's designated resident agent in Manila, appointed in compliance with Act 2486 as implemented by Department of Labor Order No. IV dated May 20, 1968, with authority to execute employment contracts and receive legal processes on behalf of the corporation. Private respondent Leonardo de la Osa was a Filipino worker recruited by FMC in Manila under employment contracts approved by the Department of Labor. Three other related cases (G.R. Nos. L-37117, L-38781, and L-39111-12) involving the same petitioner had been previously filed and disposed of by the Supreme Court, all raising the identical question of whether recruiting Filipino workers for use abroad constitutes doing business in the Philippines.

Leonardo de la Osa was employed by Facilities Management Corporation (FMC) in a succession of positions over a period of approximately three years. From March 1964 to November 1964, he served as a painter at an hourly rate of $1.25. From December 1964 to November 1965, he worked as a houseboy at $1.26 per hour, and from December 1965 to August 1966, he continued as a houseboy at $1.33 per hour. From August 1966 until March 27, 1967, he was employed as a cashier at $1.40 per hour. The site of work was Wake Island, but the employment contracts were executed and renewed in Manila, as asserted by de la Osa and not denied by FMC.

During his tenure as houseboy for the second period and as cashier, de la Osa was assigned to perform work at night, divided into two schedules: swing shift and graveyard shift. He rendered overtime services daily during the period from December 1965 to August 1966. Despite repeated demands, he was not paid either overtime compensation or night shift premiums.

On July 1, 1967, de la Osa filed a petition with the Court of Industrial Relations seeking reinstatement with full backwages, as well as recovery of overtime compensation and swing shift and graveyard shift differentials. FMC filed its answer on August 7, 1967, without substantially denying the material allegations of the petition but interposing special defenses: that FMC and J. S. Dreyer were domiciled in Wake Island, beyond the territorial jurisdiction of the Philippine Government; that respondent J. V. Catuira, though an employee of FMC stationed in Manila, lacked power and authority of legal representation; and that the employment contract carried the approval of the Department of Labor of the Philippines. FMC subsequently moved to dismiss on jurisdictional grounds, which the CIR denied on July 12, 1968, sustaining jurisdiction on the basis that the contract was executed and renewed in Manila.

The CIR's Hearing Examiner found that de la Osa was indeed assigned to and performed night-time work consisting of swing and graveyard shifts, and that his testimony to this effect was neither contradicted nor rebutted by FMC. The Hearing Examiner recommended compensation of at least fifty percent (50%) more than the basic wage rate for night shift work, in addition to overtime compensation at one and one-half (1½) times the straight time rate. On February 14, 1972, the CIR rendered a decision adopting these findings and ordering petitioners to pay de la Osa his overtime compensation, swing shift and graveyard shift premiums at the rate of fifty percent (50%) of his basic wage.

• Lack of Jurisdiction over Non-Resident Foreign Corporation: Petitioners maintained that the CIR could not validly affirm a judgment against persons domiciled outside and not doing business in the Philippines, and over whom it did not acquire jurisdiction. They argued that FMC and J. S. Dreyer were domiciled in Wake Island, beyond the territorial jurisdiction of the Philippine Government.
• Insufficient Authority of Resident Agent: Petitioners contended that respondent J. V. Catuira, though an employee of FMC stationed in Manila, was without power and authority of legal representation.
• Approval of Employment Contract: Petitioners asserted that the employment contract between de la Osa and FMC carried the approval of the Department of Labor of the Philippines, implying compliance with regulatory requirements.

• Place of Hire and Contract Execution: Respondent de la Osa argued that while the site of work was Wake Island, the place of hire was established in Manila, and the employment contract was originally executed and subsequently renewed in Manila; thus, any dispute arising therefrom should be determined in the venue where it was contracted.
• Night Shift and Overtime Entitlement: Respondent de la Osa maintained that he actually rendered night-time services as required by FMC, and that considering the physical, moral, and sociological effects of nocturnal duties, he should be compensated at least fifty percent (50%) more than his basic wage rate, in addition to overtime compensation.

• Jurisdiction over Foreign Corporation: Whether the Court of Industrial Relations validly acquired jurisdiction over a non-resident foreign corporation that recruits Filipino workers in the Philippines for its own use abroad.
• Doing Business: Whether the mere act of recruiting Filipino workers for a foreign corporation's own use abroad constitutes "doing business" in the Philippines within the meaning of Section 14, Rule 14 of the Rules of Court.
• Night Shift Premium and Overtime Pay: Whether private respondent was entitled to night shift premium pay and overtime compensation for services rendered during swing and graveyard shifts.

• Jurisdiction over Foreign Corporation: Yes. The CIR validly acquired jurisdiction over FMC, the corporation having been found to be doing business in the Philippines through its recruitment activities and appointment of a resident agent in Manila.
• Doing Business: Yes. The recruitment of Filipino workers in the Philippines for a foreign corporation's own use abroad, coupled with the appointment of a representative domiciled in the Philippines and the execution and renewal of employment contracts in Manila, constitutes "doing business" under Section 14, Rule 14 of the Rules of Court.
• Night Shift Premium and Overtime Pay: Yes. The CIR's award of overtime compensation and night shift premiums at fifty percent (50%) of the basic wage was sustained, the evidence having shown that de la Osa actually rendered night-time services without contradiction or rebuttal from petitioners.

• Jurisdiction over Foreign Corporation: Jurisdiction was properly acquired because FMC appointed Jaime V. Catuira as its agent in the Philippines, in compliance with Act 2486 as implemented by Department of Labor Order No. IV dated May 20, 1968, with authority to execute employment contracts and receive legal processes. When summons was served on Catuira, he was still in the employ of FMC. Petitioners themselves admitted in their motion to dismiss that Catuira represented FMC in the Philippines "for the purpose of making arrangements for the approval by the Department of Labor of the employment of Filipinos who are recruited by the Company as its own employees for assignment abroad." This admission established that Catuira was an officer representing FMC in the Philippines, making service of summons upon him effective under Section 14, Rule 14 of the Rules of Court.

• Doing Business: The Court adopted the majority opinion of the Court of Appeals penned by Justice Ramon C. Fernandez in CA-G.R. No. SP-01485-R (later elevated as G.R. No. L-37117), which held that FMC was doing business in the Philippines. Under the rules and regulations promulgated by the Board of Investments implementing Republic Act No. 5455, "doing business" includes soliciting orders, purchases, or service contracts; appointing a representative or distributor domiciled in the Philippines unless said representative has an independent status; opening offices; and any other act implying a continuity of commercial dealings or arrangements. FMC's activities — appointing a resident agent, executing and renewing employment contracts in Manila, and recruiting Filipino workers for its own use abroad — fell squarely within these categories. The Court further reasoned that if a foreign corporation not engaged in business in the Philippines is not banned from seeking redress in Philippine courts, a fortiori, that same corporation cannot claim exemption from being sued in Philippine courts for acts done against persons in the Philippines.

• Night Shift Premium and Overtime Pay: The CIR's findings were based on the uncontradicted and unrebutted testimony of de la Osa that he was assigned to and performed work during swing and graveyard shifts. Given the physical, moral, and sociological effects of nocturnal duties, the CIR determined that compensation of at least fifty percent (50%) more than the basic wage rate was warranted, consistent with overtime compensation stipulated at one and one-half (1½) times the straight time rate. The Supreme Court found no reason to disturb these factual findings.

• Doing Business Doctrine — No single rule or governing principle can be laid down as to what constitutes "doing" or "engaging in" or "transacting" business; each case must be judged in light of its peculiar environmental circumstances. The true test is whether the foreign corporation is continuing the body or substance of the business or enterprise for which it was organized, or whether it has substantially retired from it. The term implies a continuity of commercial dealings and arrangements, and contemplates the performance of acts or works or the exercise of some of the functions normally incident to, and in progressive prosecution of, the purpose and object of its organization. In this case, the recruitment of Filipino workers in Manila, the appointment of a resident agent, and the execution and renewal of employment contracts in the Philippines constituted a continuity of commercial dealings amounting to "doing business."

• Jurisdiction over Non-Resident Foreign Corporations — Under Section 14, Rule 14 of the Rules of Court, service of summons may be made on a foreign corporation doing business in the Philippines through its resident agent designated in accordance with law. The object of the licensing requirement was not to prevent a foreign corporation from performing single isolated acts, but to prevent it from acquiring a domicile for business without taking steps to render it amenable to suit in local courts. A foreign corporation that is not engaged in business in the Philippines may still seek redress in Philippine courts; a fortiori, it cannot claim exemption from being sued in Philippine courts for acts done against persons in the Philippines.

• "Indeed, if a foreign corporation, not engaged in business in the Philippines, is not banned from seeking redress from courts in the Philippines, a fortiori, that same corporation cannot claim exemption from being sued in Philippine courts for acts done against a person or persons in the Philippines." — This passage articulates the a fortiori reasoning underlying the Court's conclusion that a foreign corporation doing business in the Philippines is amenable to suit in Philippine courts, forming the ratio decidendi of the jurisdictional ruling.

• "No general rule or governing principle can be laid down as to what constitutes 'doing' or 'engaging in' or 'transacting' business. Indeed, each case must be judged in the light of its peculiar environmental circumstances." — This is the canonical formulation of the test for "doing business" as adopted from Mentholatum Co., Inc. vs. Mangalino, frequently cited in subsequent jurisprudence on foreign corporation jurisdiction.

• "The true test, however, seems to be whether the foreign corporation is continuing the body or substance of the business or enterprise for which it was organized or whether it has substantially retired from it and turned it over to another." — This defines the substantive test for determining whether a foreign corporation's activities amount to "doing business," distinguishing continuous commercial dealings from isolated transactions.

• Mentholatum Co., Inc. vs. Mangalino, 72 Phil. 524 — Cited for the canonical formulation of the test for "doing business," holding that each case must be judged in light of its peculiar circumstances and that the true test is whether the foreign corporation is continuing the body or substance of its business.
• Eastboard Navigation, Ltd. vs. Juan Ysmael & Co., Inc., 102 Phil. 1 — Followed for the principle that a foreign corporation without a license may still bring suit if it is not engaged in business in the Philippines, and that isolated transactions do not constitute engaging in business.
• Marshall Co. vs. Elser & Co., 46 Phil. 70 — Cited for the principle that the object of the licensing requirement was not to prevent foreign corporations from performing single acts but to prevent them from acquiring a domicile for business without becoming amenable to suit in local courts.
• Aetna Casualty & Surety Company vs. Pacific Star Lines, et al., G.R. No. L-26809 — Discussed as a recently decided analogous case where the Court held that a foreign insurance company not engaged in the business of insurance in the Philippines but merely collecting an assigned claim was not barred from filing suit despite lacking a license.

• Section 14, Rule 14, Rules of Court — Governs service of summons upon private foreign corporations doing business in the Philippines, allowing service on the corporation's resident agent designated in accordance with law. Applied to uphold service of summons on Jaime V. Catuira as FMC's duly appointed resident agent.
• Act 2486, as implemented by Department of Labor Order No. IV (May 20, 1968) — Requires foreign corporations recruiting Filipino workers to appoint a resident agent in the Philippines with authority to execute employment contracts and receive legal processes. FMC's compliance with this requirement was cited as evidence of doing business.
• Republic Act No. 5455, as implemented by Board of Investments rules (effective Feb. 3, 1969) — Defines "doing business" with illustrations including soliciting service contracts, appointing representatives domiciled in the Philippines, opening offices, and any act implying continuity of commercial dealings. Used to classify FMC's recruitment activities as "doing business."
• Sections 68 and 69, Act 1459 (Corporation Law) — Require foreign corporations to obtain a license to transact business in the Philippines. Discussed in the context of the Aetna case to distinguish between isolated transactions and continuous business operations.

Teehankee (Chairman), Fernandez, Guerrero, De Castro, and Melencio Herrera, JJ., concurred.